As contingency fee lawyers, we evaluate a steady stream of potential securities fraud cases. We meet with investors of all ages and backgrounds who have been cheated, defrauded and tricked into making bogus investments. We evaluate far more cases than we agree to take.
One of the most difficult types of cases that we evaluate is the so-called alternative investment case. Alternative investments are not traditional stocks or bonds purchased through a normal brokerage firm. Instead, these investments are offered directly by a promoter of some business scheme, perhaps an oil well, a gold mine, a real estate development, or some brand new technology. The promoter offers the chance to get in on the “ground floor” and make enormous profit.
The alternative investment can take the form of a limited partnership interest, an LLC interest, or some other portion of a small, non-publicly traded business entity. The investor does not get normal account statements, like a regular brokerage firm. Instead, the investor gets a K-1 at the end of the year for tax purposes and perhaps a regular newsletter on how the gold mine, oil well (or whatever) is doing. It’s almost always doing great!